Reverse charge mechanism- manpower supply

This query is : Resolved

SUNIL SINGH (Querist)
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28 August 2013 We are as corporate body discharging our service tax liability since last 5 years to our Manpower supplier who is charging us service charges and service tax there on for manpower engaged in manufacturing activity or security services.

Is that complusory to pay 75% service tax for a corporate service as a receipant even if total service tax charged & deposited by service provider

Ganeshbabu K

Ganeshbabu K (Expert)
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28 August 2013 1)Legal liability is of service receiver.

2)That liability does not disappear even assuming that the service provider has paid the service tax.

3)The department can insist on payment of service tax from you

4)[In respect of past, may be you can get away by claiming that it is only procedural mistake and no revenue loss. However, for future, please do not do it].

So strongly recommended to follow reverse charge provisions in order to avoid further litigation with department

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SUNIL SINGH

SUNIL SINGH (Querist)
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28 August 2013 Many Thanks for the quick response. In fact I have the same opinion.

The only clarification seeking from Govt (Service Tax Department), can we follow the procedure regarding further transactions in future.

Ganeshbabu K

Ganeshbabu K (Expert)
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28 August 2013 1)Yes,,What ever done you left,,And strictly follow this provisions now onwards

2)As a matter of precaution Get a declaration from your service provider that they have paid entire 12.36% collected from you to the department

(Because they have alright to deposit only 25% and rest can retain themselves)

It would be better if this declaration supported by some documentary evidence

3)
(i)Service tax is payable by service receiver when actual payment is made to service provider and not on receipt of Invoice from service provider.

(ii)However, if payment is not made to service provider within 6 months, service tax is anyway payable. Interest is also payable.

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